Rockefeller 2.0: Gates relaunches philanthropy

Split intentions
But perhaps the most stinging criticism of the Gates Foundation so far is that it (and Buffett) has been investing its considerable charitable assets in corporations that, in many instances, have been contradicting its charitable goals — from companies responsible for heavy air pollution in the Niger Delta to pharmaceutical firms whose pricing policies have tended to keep antiretroviral drugs out of reach for HIV/AIDS patients in developing nations. Some even allege that Gates Foundation investments — as well as Buffett’s — are indirectly supporting the Sudanese oil industry, whose profits, some say, help to support the Sudanese government’s genocide in Darfur.

Though many foundations in America similarly invest their assets in companies that don’t always stand for their own goals as organizations, the Gates Foundation has come under particular criticism for this type of disconnect: the endowment is managed by Bill Gates Investments, which handles Gates’ personal fortune. A January 2007 investigation by The Los Angeles Times found that 41 percent of Gates Foundation’s investments, totaling at least $8.7 billion, have been in companies “that countered the foundation’s charitable goals or socially concerned philosophy.” In addition, much of these investments have been in companies that “have failed tests of social responsibility because of environmental lapses, employment discrimination, disregard for workers’ rights or unethical behavior,” the newspaper said. For example, the foundation has poured $218 million into polio and measles immunization and research worldwide, including in the Niger Delta. At the same time the foundation is funding inoculations to protect health, The Times found, the Gates foundation has invested $423 million in Eni, Royal Dutch Shell, Exxon Mobil Corp., Chevron Corp. and Total of France — the companies responsible for most of the flares blanketing the delta with pollution.

Writing in the May/June 2007 issue of Contribute, a New York-based news magazine and Web site covering the sector, fundraising executive and New York University fundraising lecturer Naomi Levine criticized the foundation for failing to use its considerable financial clout to influence companies to change their policies. “(The Gates Foundation) hasn’t tried to influence other foundations to divest from companies that don’t share their socially responsible ideals,” Levine wrote. “…The foundation’s poor example here should be a siren call for reforms and stepped-up oversight.”

Perhaps most aggravating to Gates Foundation critics is the way it has dealt with their concerns, which some analysts suggest is a carryover from Microsoft’s highly independent and autonomous culture. When the investments story first broke in the Los Angeles Times, for example, the Gates Foundation’s chief operating officer, Cheryl Scott, told a reporter that the foundation would, for the first time, conduct a methodical review of its investments to determine whether it should divest from companies doing harm. She also acknowledged that the way the foundation had been investing its money was not “100 percent effective.” Days later, however, outgoing CEO Stonesifer said any changes in the foundation’s investment policies would probably not occur. Why? Her answer: “Changes in our investment practice would have little or no impact on the suffering identified in The Los Angeles Times article. [We] don’t own big-enough stakes in companies to influence their behavior through shareholder activism.”

To many in the foundation community, the episode represented a time when the Gates Foundation blew an important opportunity to seize global leadership in the philanthropy community worldwide. While the Ford, John D. and Catherine T. MacArthur, Rockefeller and Charles Stewart Mott foundations all make social justice, corporate governance and environmental stewardship key considerations in their investment strategies, the Gates Foundation has not, and does not — to the frustration of leaders in the field across the board. “With the resources that the Gates foundation has at its command, it could provide an extraordinarily important leadership role for the field if it were willing to shift its investments to more socially responsible companies,” says philanthropy historian Kathleen McCarthy. Adds Doug Bauer, senior vice president of Rockefeller Philanthropy Advisers, a nonprofit that counsels foundations: “When the No. 1 foundation is rethinking something, others are going to look at it more carefully.” The Gateses, he added, have the power to “cause a seismic shift in the field.”

An unlikely journey
Nobody, not even Bill himself, expected to find himself such a catalyst outside the technology industry. The socially awkward upstart — who at the age of 12 began effectively debating with his father the logic of doing some household chores — became a billionaire from Microsoft’s 1986 IPO. He had initially resisted the idea of philanthropy: lawyers and accountants advised him to start a foundation “but he refused,” William H. Gates, Sr., told Fortune writer Patricia Sellers in a January 21, 2008 cover story profile of Melinda. “(Bill) said he didn’t need another entity.”

It wasn’t that Gates didn’t know any better: Gates Sr. was head of Planned Parenthood when Bill was growing up; his mother was on the United Way board and continuously urged Bill to form a United Way team at Microsoft, which he eventually did. But the young Gates, for many years, actually feared the dichotomy, seeing the push to make money and the act of giving it away as contradictory, rather than part of the same value system.

According to Gates family lore, it was Bill’s courtship and marriage to Melinda French — a girl from a middle-class family in Dallas who worked her way up to an executive at Microsoft before dating Gates — that turned Gates around. Bill’s mother, Mary Gates, also had a huge influence on Bill’s evolution, urging him, relentlessly, to become more active philanthropically: ironically, it was she who introduced her son to Buffett at a Fourth of July barbecue in 1991 that Bill only attended after Mary begged him to come. Later, at Melinda’s wedding shower in 1993, Mary presented her with a letter that, in so many words, said: “From those to whom much is given, much is expected.” Mary Gates passed away the following year; a short time later, the family created the first Gates charity, The William H. Gates Foundation. Bill's father, with $94 million or so worth of Microsoft stock, ran it out of his basement.

Initially, the Gates’ foray into philanthropy sought to put laptops in classrooms — which some had seen at the time as a self-serving gesture by a software tycoon. But Melinda realized, Fortune’s Sellers wrote, that while volunteering in a couple of schools in Seattle at the time, the technology gap was only part of the problem. She and Bill then decided to take on education reforms more broadly, focusing on secondary schools. “No one was touching high schools,” she told Fortune. “… Bill and I like to work on the problems that nobody else seems to want to face because they’re so hard.”

Next steps
One big part of Bill’s new job will be to make more public appearances and do more schmoozing with governments and corporations as part of the couple’s new advocacy for the world’s poor. “I’m uniquely able to reach out to the big companies, to ask them not just to write checks but to offer more of their innovative power,” Gates told Fortune editor Brent Schlender in a June 20 piece on the transition. “There’s a big category of my time for talking to drug companies, cell phone companies, banks and technology companies as well as talking with other people who are lucky enough to have super-big fortunes about how they want to give those back to society.”

Melinda, meanwhile, will continue to size up ways that technology — and not just software — can be engaged to further the goals of the foundation. At a recent digital tech conference in California in June, Melinda pointed out to conference attendees that of the 6.6 billion people in the world, 3.7 billion have access to a cell phone. “This opens an opportunity to use mobile technology for reworking banking for the poor,” she says. “…Technological revolutions or advances — as the price of (cell phones) really get down — how can we change things for people who live on less than $2 a day?”

Yet along with the passion and curiosity, both Bill and Melinda seem acutely aware of the daunting challenge they’ve created for themselves. “We will make mistakes,” Gates told Moyers in the 2003 interview. “But then again you’ve got to take risks and that’s one of the things a philanthropist can do that governments aren’t as well-suited to do. We in philanthropy should be doing the things that the normal approaches can’t do, whether it’s approaches to the AIDS vaccine or malaria or delivery systems. We’ve got to be out there and accept some kind of failure rate.”   

Gates — who dropped out of Harvard to create Microsoft — returned to the university last year to accept an honorary degree and to deliver the 2007 commencement speech to graduates. It was, Gates-watchers agreed, probably one of his finest speeches ever, an eloquent reminder that success doesn’t always mean following the rules. Among other things, Gates told Harvard students that technological achievement is critical in the years ahead, but that “humanity’s greatest advances are not in is discoveries but in how those discoveries are applied to reduce inequity … reducing human inequity is the highest human achievement.”

No question, Bill Gates — innovator, rule-breaker, geek-turned-philanthropist — is just getting started.

More from msnbc.com First Read: Around the world in eight days First Read: Palin tour takes page from campaign From cheers to tears near Fort Hood Vicarious thrill: He wants her to be hit on Stimulus tracker: See where millions of dollars went On Twitter: Breaking news updates | Weird and wild

MORE FROM GIVING

Giving Section Front

Philanthropist funds fight against autism Widow leaves millions for opera, birds ‘Slow money’ gains momentum Molly Sims joins fight against malaria Pepsi pays to 'refresh' communities ‘Sleepers’ raise money for homeless Madonna promises light for Malawian village Giving Section Front   Add Giving headlines to your news reader: